That’s more what I was wondering. I’m sure most big customers can get a contract that lets them pay over time, but this particular bubble feels significantly out of the ordinary.
If I’m a RAM manufacturer, there’s got to be some kind of guarantee that makes me me confident enough that I’ll see that money in the end if I’m putting that many eggs in one basket.
Are you? A purchase order is a contract between two parties for one party to purchase the future production output of the other.
This is how a lot of businesses operate. None of us have seen the contracts, but do you honestly think the legal and financial people at the chip fab would agree to a contract where they’re stuck holding the bag?
How does that work? Are they taking out a loan?
Last time I went round with someone on this, they insisted that this is just normal business procedure to order product on credit.
To me, while trade credit is definitely a thing, for orders this large I expect there’s some more substantial backing for it.
Ultimately it probably fits in somewhere on a chart of financial shenanigans like this one:
That’s more what I was wondering. I’m sure most big customers can get a contract that lets them pay over time, but this particular bubble feels significantly out of the ordinary.
If I’m a RAM manufacturer, there’s got to be some kind of guarantee that makes me me confident enough that I’ll see that money in the end if I’m putting that many eggs in one basket.
I mean, contracts are how you get that guarantee.
But what is motivating RAM manufacturers to sign that contract? Why can the commenter above figure it out, but they can’t?
Because the contract would be an agreement for the purchasing company to pay for the products they ordered to be manufactured.
Are you being deliberately obtuse?
Are you? A purchase order is a contract between two parties for one party to purchase the future production output of the other.
This is how a lot of businesses operate. None of us have seen the contracts, but do you honestly think the legal and financial people at the chip fab would agree to a contract where they’re stuck holding the bag?